PHOENIX - August 1998 - A group of Best Western International
(BWI) member owners filed a lawsuit in Arizona’s Superior Court against
the association to force its democratically-elected board of directors
to disclose financial, personnel and other records to expose what they
allege are improper business practices and to seek to address them.

Calling itself “Vision 20/20,” the 100-plus member group had paid for
an audit investigation in which a review of Best Western financial statements
that began last January and was completed in May allegedly turned up “questionable”
expense payments and severance payments for former staff, among other
alleged irregularities.

Jerry Manion, COO at BWI, said the lawsuit was “ill-founded” and based
on personal vendettas by members who don’t want to live up to their membership
requirements.

“There are three members with ulterior motives and they’re attempting
to wreak havoc on the organization for their own personal reasons,” Manion
said. “All of their questions were addressed by the board.”

The report was researched by accountant Charles Berg, a certified fraud
examiner, who alleged numerous problems in the chain’s accounting procedures,
such as ill-documented advances and falsified expense vouchers. Although
the report was presented to the BWI board of directors for review, Vision
20/20 committee members stated in the lawsuit that their requests to review
additional documentation and disclose it to the membership was denied,
prompting the lawsuit by Roger Marce, who also represents litigant James
Dittmer in personal litigation.

Filed June 9, the claims in the lawsuit include:

Questionable expense payments to former President/CEO Ron Evans;

Former executives allegedly receiving “excessive” severance payments,
one of which was rumored to be as much as $350,000, in exchange for silence
about the company;

An endorsed vendor program which promises better service at lower rates,
but which allegedly charges Best Western members more and provides the
chain with a kickback;

Potential liability related to its refusal to disclose information
to claimants suing the former BWI-endorsed insurance agent over the mishandling
of insurance premiums;

Member dissension and potential litigation over design change requirements
that have put an estimated 26% of members on probation (BWI puts the figure
at 8.5%);

Pressure by the board to keep the Berg report a secret, instead of
implementing independent controls and reviews of management expense practices
and requiring the return of improperly paid expense monies.

Manion said the expenses incurred by Evans were investigated in an independent
audit by Ernst & Young, which found that all but $13,043 were not sufficiently
documented. The unexplained expenses were related to a tennis club with
a private dining room that Evans used for business entertainment for directors,
staff, the press and others that billed the company.

Manion said Evans did not have detailed receipts and could not recall
all of the occasions that he had signed for meals, so he reimbursed the
company the difference to settle the issue. Evans had left the company
at the end of March to assume directorship of Northern Arizona University’s
hospitality school.

“The company did not pay one dime of personal expense for Ron Evans,”
Manion said.

The BWI board of directors sent a 7-page letter to its membership
on July 24 responding to a letter from
Marce to members on the lawsuit, calling its assertions “ill-founded allegations.”
The letter stated that three members of the Vision 20/20 committee sued
BWI, not the full committee, and claimed that they had personal agendas.
According to the board of directors, Best Western had given Berg access
to all of the records he had requested, prior to his preliminary presentation
of his findings at the board meeting on March 17.

“Mr. Berg now claims he was hampered in his access to records,” the
letter states. “Best Western has no knowledge of Mr. Berg ever requesting
records to which he was denied accesss or making claims to that effect
before Best Western refused to take over financial responsibility for his
services. When Mr. Dittmer insisted that the transaction be dependent upon
the unreasonable demand that Best Western also take on legal liability
for any and all acts relating to Mr. Berg’s report, Best Western rightfully
refused to agree.”

The three Vision 20/20 members who the lawsuit said volunteered
to file the suit for the committee included:

James Dittmer,

Peter Kreuziger and

Norman Blankman.

The letter from the BWI board addresses oversight issues, stating that
independent controls and reviews have been implemented and an additional
full - time audit function is being developed under a contract with Deloitte
& Touche, in addition to annual external audits by KPMG Peat Marwick.

Addressing “excessive payments to past employees,” the letter said the
board adheres to a standard severance package in the majority of situations.
It claimed that the “confidential settlement agreement” that was made in
1994 for an amount rumored to be around $350,000 was to a former vp “who
threatened to sue Best Western and raised issues that posed possible legal
jeopardy to the Best Western organization.” Two other payments to former
executives were outlined, including a former vp who was given a short-term
consulting contract in addition to severance for a “smooth transition,”
and a staff director whose lawsuit for unjust termination was settled.
Another case of a vp terminated in 1995 is ongoing and could not be
discussed, according to the letter.

Manion said the records are personnel-related and are private. Roger
Marce, the attorney for Vision 20/20, said BWI’s board offers a circular
argument for why it doesn’t go beyond the limited review of financial and
related records for full disclosure to an auditor.

“They’re saying your request is being rejected because it’s not
for an individual, and by the way, if it were for an individual it
would be rejected for these reasons,” Marce said.

The BWI board of directors letter also addressed questions about the
endorsed vendor program, explaining that individuals on occasion could
potentially negotiate better prices, that Best Western charges a 2.4% mark-up,
rather than the industry standard of between 14%-20% and that it is essentially
fair to members.

BWI said virtually all litigation connected to the insurance program
had been settled and that the problems have been addressed. Also, the letter
said that only 8.5% of the membership is on probation for failing to make
design changes, and that the changes were necessary to remain competitive.

The hearing that at presstime was scheduled for Aug. 5 should have determined
whether Best Western had any grounds to withhold any of the information
requested and then set another hearing for ruling on the matter.

“We’re only asking for information that would help with creating a more
open way of operating, so that programs that are ill-advised can be recognized
early on,” Marce said. “We think there are problems being swept under the
rug and people being paid off for confidentiality.”

Marce said the lawsuit has already had an impact in motivating the board
to address issues, such as its move to establish an internal review office
that doesn’t report to the president, is not hired by the president and
is not accountable to the president.

A non-profit organization in which the chain operators are “members,”
BWI elects its board of directors from seven districts in the United States.
The board of directors, which meets in the headquarters office in Phoenix
one week out of each month, essentially runs the company, but hires an
executive team to execute policy. The board includes: Don Seaton, chairman;
Mike Scholz, Loren Unruh, David Huff, Sr., Mark Brown, John Van Duyn and
Cindy Binkele. Comprised of small business operators, the directors
on the board are paid for their time, including travel and other expenses.